Lending money to a friend or relative is common, but when repayment doesn’t happen, it can become a legal headache. Ontario law offers a way to recover personal loans through Small Claims Court. Tim at MTS Paralegal Services helps clients document their claims correctly and pursue them effectively.

Establishing That a Loan Exists

To succeed, you need to show the money was expected to be repaid — not given as a gift. Useful evidence includes:

• A written loan agreement signed by both parties (if available)
• Emails, texts, or messages confirming repayment terms (due dates, interest, etc.)
• Bank transfers or e-transfers labeling the funds as “loan” or “repayment”
• Witness testimony about what was agreed

Even without a written contract, courts may accept other clear proof that both sides understood there was a loan and repayment obligation.

Calculating the Claim

Include in your claim:

• Principal loaned amount
• Any agreed interest (making sure it does not exceed legal maximum under the Criminal Code) or alternatively, statutory interest if no rate was agreed
• Costs reasonably incurred because of non-payment (e.g. bank fees, collection costs if documented)

It’s vital the claim is accurate — over-claiming can hurt credibility or even get dismissed.

Filing in Small Claims Court

Small Claims Court is the correct place for most loan disputes between individuals. Key steps include:

1. Preparing the Plaintiff’s Claim — Set out who owes what, when repayment was due, attach proof (agreements, messages, bank statements).
2. Serving the Defendant — Serve the borrower in accordance with court rules, then file proof of service.
3. Waiting for a Defence — In Ontario, the defendant has 20 calendar days after service to file a defence. If they don’t, you may seek default judgment.
4. Settlement Conference — If a defence is filed, a mandatory settlement conference (Rule 13) will be scheduled. Parties must exchange proposed witness lists, documents, etc., ahead of that.
   
5. Trial — If no settlement, the claim proceeds to trial where all evidence is presented.

Enforcement of Judgment

Once you have a judgment, you can enforce it through:

• Garnishment of wages
• Seizure of bank accounts
• Writ of seizure and sale of personal property

Make sure to comply with procedural rules around enforcement.

Why Professional Assistance Matters

Loan disputes between friends/family can get emotional. Defences might include arguments that the funds were a gift, or that there was no clear or enforceable agreement. Proper documentation, clear proof of terms, and correct procedure are essential.

As of October 1, 2025, the Small Claims Court limit increases to $50,000, meaning more substantial claims can be pursued without moving to a more expensive court.If you need help organizing your evidence or filing the correct paperwork, contact Tim at MTS Paralegal Services — (226) 444-4882 or mtsparalegalservices.com.